Quick, what’s the worst year in American automotive history?
Recent bias might lead you to select 2008, when an unprecedented modern financial crisis slammed the overall economy and led to a government bailout of GM and Chrysler (those carmakers received $80 billion after taking a 40 percent nosedive in sales and having some 3 million jobs at risk). But the near-death experience yielded vehicles and automakers more closely aligned to consumers’ needs and desires.
Arguments could be made that 1929 proved far worse, as the stock market crash and the Great Depression that followed drove many automakers out of business. But that period also yielded some of the finest cars ever produced, ones with names like Marmon, Duesenberg, Pierce-Arrow, Stutz, and many others. Or perhaps it was 1957, when the last of the independent automakers, Nash and Hudson, disappeared from the market, and Packard was gasping its final breath as a poorly disguised Studebaker, a company that would disappear a decade later.
No, it’s 1980. With the arrival of the second OPEC Oil Embargo the year before, a recession took hold of the country. Sales of US-made cars came in at 6.58 million units, down 20 percent from 1979, as import automakers claimed a 26.1 percent market share, up from 21.2 percent in 1979. Ford lost a record $1.5 billion as domestic sales plunged 33 percent and worldwide sales declined 29 percent. Chrysler, having lost $2 billion in the past year and a half, was in such bad shape that banks wouldn’t lend it money. Instead, Congress did, providing a $1.5 billion loan guaranteed by the federal government. Even General Motors was hit by a $763 million loss, the company’s first since 1921.
But bad numbers alone don’t earn 1980 the title of ‘Worst Automotive Year Ever.’ Having to engineer cars with new technology for the first time in decades, the Big Three struggled to meet the unprecedented demand for small fuel-efficient cars. And in the face of profits and market share declining, Detroit responded by, frankly, fielding some of the worst cars it has ever produced.
Why did it come to this? In short, the bean counters triumphed—though, of course, the full picture is a touch more complicated than that. To truly grasp the rock bottom that US automakers hit in 1980, you need to rewind a few years earlier and understand the global trends these titans of industry were simply unequipped to handle.
First, though, you can see the proof by looking at the pudding: consider the legendarily woeful cars of 1980 themselves.
A gallery of 1980 malaise
1981 AMC Eagle
As its Concord and Spirit models aged, and its all-new Pacer flopped thanks to its unusual fishbowl styling, funds for new vehicle development dwindled. Like too many American cars of this era, American Motors Corporation gussied up its aging hardware to create something new. AMC took its Concord and Spirit models, added a new Quadra-Trac four-wheel drive system (although a Selec-Trac part-time system was optional in 1981), and renamed them AMC Eagles. Powered by AMC’s venerable, if wheezy, 4.2-liter straight-six and offered in coupe, sedan, and wagon models, these cars resembled a Concord or Spirit standing on its toes.
In the end, their familiar looks were now a decade old and looking older by the day. The added capability failed to excite enough buyers. The charade fooled no one. Dwindling sales and revenue drove AMC into a merger with French automaker Renault.
1981 Cadillac Seville
While its novel bustleback styling was quickly copied by Ford and Chrysler, its engine—the L62 6.0-liter V-8—was not. The V-8’s Computer Command Module used a variety of inputs to determine whether to deactivate two or four cylinders by disengaging the appropriate rocker arms. Unfortunately, the microprocessors couldn’t react fast enough as driving conditions changed, causing the car to hesitate, buck, and stall. Many dealers disabled the system on customer cars, leaving those vehicles permanently in V8 mode.
GM ultimately pulled the engine after a single year, but not before massive damage to Cadillac’s image as “the Standard of the World.” A novel approach to fuel economy at the time, cylinder deactivation reappeared as the redesigned and far-more-reliable Active Fuel Management—though it took nearly two decades before reappearing in GM’s 2005 mid-sized SUVs.
1981 Chevrolet Corvette
If any car represents the stagnation caused by the accountant takeover of Detroit, it’s the 1980 Corvette. Largely unchanged stylistically since 1968, federal fuel economy and emission mandates had robbed much of its performance, with the ’81 Corvette’s 350-cubic-inch V8 producing a meager 190 horsepower. At least you could still get a four-speed manual transmission.
With fuel efficiency becoming the paramount concern and performance largely ignored, this Corvette’s speedometer stopped at a mere 85 mph. Maybe based on its legendary name alone, Chevy still managed to sell 40,606 units.
1981 Chrysler Imperial
Similar to the ’81 AMC Eagle, this Chrysler Imperial was little more than a new wardrobe over old entrails. In this case, the entrails came from the Chrysler Cordoba, which in turn was built on the corporate B-body (aka the none-too-new Dodge Coronet and Plymouth Satellite).
The situation gets worse. Chrysler’s winded 5.2-liter V8 produced a mere 140 horsepower, exacerbated by its notoriously unreliable lean-burn carburetor. And, since this thing was based on the Cordoba, you could get most of the options for half the price—unless you wanted the Frank Sinatra Package, of course. That particular offering was exclusive to the Imperial, and it included a cassette tape of Old Blue Eyes’ finest music.
1981 DeLorean DMC-12
Sure, memory loves this car because of its star turn in the film Back to the Future. But make no mistake, the DeLorean was a project doomed to failure. Start by taking one former General Motors executive and add Italian automobile designer Giorgetto Giugiaro to create a coupe with gull-wing doors at a time when Americans adored two-door coupes, and you get the DMC-12. Sounds promising, right?
The project began to go off the rails when Mr. DeLorean obtained funding from the British government to build his factory in a country not exactly brimming with manufacturing expertise: Northern Ireland. What could go wrong? In retrospect, the answer seems to be “everything.” Overpriced ($25,000, or $77,355 today) and underpowered (140 horses), this car never had a prayer.
1981 Ferrari Mondial
Don’t be fooled by this car’s beautiful Pininfarina-styling: the Mondial is proof that even Enzo didn’t always get it right.
Introduced the previous year, it was built on a 308 chassis. But this 2+2 coupe’s added weight taxed the transversely mounted, mid-engined V8’s 214 horsepower. It wasn’t helped by its tangle of complicated electronics, which didn’t take long to fail. Meant to be a grand touring Ferrari, the Mondial became known as one of the cheap used Ferraris, and with good reason.
1981 Ford Mustang
While the Mustang II gets derided for its lack of performance, the same is true of any early Fox-platform Mustang. Offered as a two-door notchback and a three-door hatchback, the 1981 Mustang’s base engine was an 88-horsepower, 2.3-liter four-cylinder engine. Upgrade options included a 94-horsepower 3.3 liter inline six-cylinder and a 115 horsepower 4.2 V8, but offered only with a three-speed automatic transmission.
Despite the presence of a Cobra model, the return of true Mustang performance was still in the future.
1981 Ford Thunderbird
The car that invented the personal luxury coupe was born a two-door convertible. The Thunderbird was forever a pop icon after being mentioned in The Beach Boys’ song “Fun, Fun, Fun” and co-starring in the 1973 film American Graffiti.
But by 1980, it was little more than an overdressed Ford Fairmont, powered by a wheezy 88-horsepower, 2.3 liter four-cylinder, a 115-horsepower 4.2-liter V8, or a 130-horsepower 5.0-liter V8. Thankfully, this scrawny bird was replaced by a bird that proved far more substantial in 1983.
1981 General Motors X-Cars
It’s an ominous distinction, but here was Motor Trend’s 1980 Car of the Year. The Chevrolet Citation was one of four compact X-Cars at the time, along with the Buick Skylark, Oldsmobile Omega, and Pontiac Phoenix.
If any GM cars proved the ineptness of product development under GMAD (the General Motors Assembly Division), these cars are exhibit A. GMAD’s poor management would handicap GM product development for decades, leading to a market share that was one-third of what it was in 1962.
While initially popular, the X-Car came with a slew of defects as standard: bad welds, failing transmissions, vibrating engines, and exceptionally poor brakes. Many recalls followed. More than a million people bought them, but how many bought another GM car?
1982 Pontiac T1000
One of Pontiac’s newest models in 1981 was, surprise, not all that new. Introduced in the spring as a 1982 model, the T1000 was a badge-engineered version of the Chevrolet Chevette, built on GM’s T-platform featuring rear-wheel drive at a time when the industry was introducing new small cars with front-wheel drive. Given that the Chevette subcompact debuted in Brazil in 1973, this car was already outdated. Worse, the T1000 was genuinely identical to the Chevette, with a noisy, underpowered 65-horsepower 1.6-liter four-cylinder engine and four-speed manual transmission. A harsh ride, cramped accommodations, and an AM radio were also standard.
But nothing symbolizes GM’s contempt for small-car buyers than foisting this spartan, noisy, rough-riding car into showrooms thinking it would attract buyers. It didn’t attract many. It was replaced by the Chevy Vega-derived Sunbird in the Pontiac lineup.
The roots of Detroit’s 1980s unraveling
How did the US end up on the receiving end of that near-dirty-dozen? The seeds of Detroit’s 1980 unraveling were being planted in the midst of its very success in the preceding decades; it’s just that few people realized it at the time.
When Henry Ford II was granted an early discharge from the Navy in 1943 to wrest control of Ford Motor Company from the hands of his increasingly senile grandfather, he hired Ernest Breech, president of North American Aviation. Breech in turn hired 10 young Air Force officers known as the “Whiz Kids.” These statistical control specialists were known for their financial acumen, rescuing a company that was losing $10 million a month by implementing the same statistical management techniques they used while in the Army Air Force during World War II. This lesson was not lost on America’s other automakers, who would also go on to replace executives who had automotive expertise with those who had pecuniary proficiency.
At Chrysler, the rise of accountants came when Lynn Townsend replaced William Newberg as Chrysler president in 1961. Townsend served as president through 1966, becoming chairman in 1967. Townsend cut expenses, improved Chrysler’s product lineup, and revamped its dealer network. By 1968, Chrysler’s market share doubled—but things would sour shortly thereafter.
Meanwhile, General Motors had appointed Frederic Donner chairman and CEO in 1958. The former accountant’s ascension represented a fundamental shift toward the corporate priorities of profit and stock price—but not of product quality, however, and it became of utmost importance. Initially, there appeared to be little cause for concern. By 1962, GM accounted for 50.7 percent of all cars sold in the US market. Given that market share, the only threat GM faced was being broken up under the Sherman Antitrust Act. And to prevent that, product development was taken away from GM’s car divisions and consolidated into GMAD. While breaking GM apart would prove to be far more difficult, the move would have unintended consequences.
Nevertheless, Detroit’s initial 1960s offensive against the growing popularity of the Volkswagen Beetle, a Third Reich relic, proved successful. But notably, the conventionally engineered Ford Falcon outsold the technically advanced Chevrolet Corvair two to one. GM responded by fielding the conventionally engineered and equally mundane 1962 Chevy II. When the Ford Mustang, basically a rebodied Falcon, arrived two years later and sold more than 1 million units in 24 months, Ford’s success reinforced one perception among all of Detroit’s bean counters: innovation doesn’t sell; style does.
The small car threat rises once more
In 1971, 10 years after Detroit first grappled with the growing demand for small cars, the Big Three were once more losing market share to Japanese cars now that those compact cars had grown into midsize cars. But the resulting subcompact cars that came out of Detroit did little to win over consumers already buying Toyotas, Datsuns, and Volkswagens.
Worse, these cars were plagued with problems. Costly engineering largely took a backseat to styling and penny-pinching, particularly at GM. While the company’s engineering remained first-rate, its product development suffered under GMAD. (The 1971 Vega, 1979 X-Cars, and the 8-6-4 Cadillacs of the early 1980s are poster children for Donner’s misguided reorganization.)
Ultimately, consumers’ affection for small cars proved to be fickle. When OPEC enacted an oil embargo against the United States in 1973, small-car sales soared in reaction to skyrocketing gas prices. Once the embargo ended and fuel prices stabilized, big cars regained their popularity, reinforcing Detroit’s long-held belief that Americans prefer big cars.
But the enactment of the 1975 Corporate Average Fuel Economy (or CAFE) standards, requiring automakers’ fleets to average 27.5 mpg by 1985, brought carmakers face to face with a tough realization. The technology, assumptions, and complacency that guided the industry since the late 1950s would no longer suffice. Their cars would have to get smaller, lighter, and more fuel-efficient. So, despite the track record of the Vega and Pinto, all three Detroit automakers began downsizing.
Despite its perilous financial state, Chrysler was first to offer a domestic-built front-wheel-drive hatchback. These cars were popular with buyers in 1978, even though the Dodge Omni and Plymouth Horizon essentially copied the Volkswagen Rabbit (right down to initially being powered by VW engines). Chrysler next released the Dodge Omni 024 and Plymouth TC3 two-door hatchbacks, but the rest of the line was downsized by slapping full-size styling and nameplates on revised midsize cars. Ford fared a little better, with its compact rear-wheel-drive Fairmont debuting in 1978 alongside the new Mustang. Ford’s full-size cars downsized in 1979.
General Motors’ large and midsize cars downsized by 1978. Their compact cars, known internally as the X-Cars, were downsized for 1979. But the company would employ front-wheel drive, the beginning of a fleetwide changeover to front-wheel drive to meet CAFE standards.
One company that didn’t have to downsize at all was American Motors. Its line of compact cars, largely unchanged since the late 1960s, already met the spirit of the times. But a lack of cash and the flop of its new small car, the 1976 AMC Pacer, led to meager sales and an equity tie-up with French automaker Renault.
As Detroit struggled with this new reality brought on by government regulation and conflicting consumer demands, February 1979 also saw the overthrow of the Shah of Iran and a new oil embargo that November. As inflation hit 13.3 percent, America was thrown into recession.
It was a perfect storm: a financial recession, an oil crisis, automakers taking the wrong cues from consumer sales, profit-driven financial pros at the helm, and the idea that a 140-horsepower coupe with gull-wing doors was a sports car.
The effects would lead to one of the worst years ever for new cars as a new decade dawned.
In with the new…
But the hard times had a transformative effect in the decade that followed. With Ford, Chrysler, and AMC striving to avoid bankruptcy, Detroit realized that the old ways of doing business, a notion brought on by years of fat profits and complacency, were over.
Ford realized it the quickest. Henry Ford II retired as CEO, naming Phillip Caldwell as his replacement, the first non-family CEO in the company’s history. As sales plunged more than 45 percent in the next three years, Caldwell plotted the company’s comeback by working with the UAW to improve quality and pushing the design staff to design the most desirable vehicles it had fielded in 20 years.
Having come closest to death, Chrysler remade its fleet using the compact, fuel-efficient K-Car as its base, becoming successful enough in the years that followed to pay back the $1.2 billion government loan guarantee two years early. That same year, Chrysler introduced the Dodge Caravan and Plymouth Voyager minivans, creating a whole new product segment and ensuring its survival. Times were so good in fact, Chrysler bought AMC from Renault in 1987 as company CEO Lee Iacocca thought Jeep was a jewel worth having. He proved correct, and the company would continue to prosper until its acquisition by Daimler-Benz in 1998 muddled its future and led to its bankruptcy a decade later.
For GM, with its full coffers and insulated management, it would take at least another decade before it would face its first crisis in decades. Under bean-counter CEO Roger Smith, the company began slowly sinking, succumbing to sliding market share, ill-advised acquisitions, and the idea that you could buy quality through automation. By 1991, GM was losing $1,500 on every vehicle it manufactured in North America. The following year, 1992, saw new CEO Robert Stempel order drastic cuts. But few at the time thought it enough. They would be proven correct 16 years later when the unthinkable happened, when GM, once the world’s largest corporation, declared bankruptcy.